Dave Ramsey: Question on statute of limitations

Wednesday

May 30, 2012 at 12:01 AMMay 30, 2012 at 11:50 AM

Weekly financial Q&A, with advice on settling an old debt and disability insurance.

Dave Ramsey

Dear Dave,

I bought a car a few years ago and purchased new wheels for $1,100 on credit. I haven’t paid the bill, and now collectors are trying to settle with me. I think the statute of limitations has expired. Should I still pay the debt?

Brian

Dear Brian,

I always look at things like this through two or three lenses. One has to do with your credit. Another is the legal aspect, and the third is this: What’s the right thing to do?

The right thing to do is pay the debt. You took the wheels, so you need to pay for them. You could probably scratch together $1,100 and make this whole thing go away. I’m pretty sure a lot of legal and collection costs, as well as interest, have been added over the years. But at this point, you can probably get them to settle for the original amount owed.

Now, can they still chase you under the statute of limitations? That’s a matter of state law, and since I’m not an attorney, I’m not up to speed on every law from state to state. Besides, I don’t like the idea of using that kind of argument to get someone out of debt.

Honestly, this is the real world we’re talking about, Brian. You’re going to have to deal with this, because even if there is a statute of limitations, most collectors will still try to chase you to the ends of the earth. And for $1,100 you can get them out of your life and erase a big black mark from your credit. It’s always better to have a transaction listed as “bad debt that has been settled” rather than simply “bad debt.”

And by the way, it’s also the right thing to do!

No secondary policy necessary

Dear Dave,

I’m a doctor, and I’ve been at my current job for six months. I’m scheduled to make $190,000 this year, and my husband and I will be debt-free in a few months. My employer provides disability insurance free of charge, but if I stop working for this company I’ll no longer have the insurance. Should I get my own policy instead of the one at work?

Laura

Dear Laura,

Unless you become seriously ill, it’s easy to get long-term disability insurance. You could find it through some of the medical associations, or you could find it the way your employer found the policy you have now — through an independent broker who shops and makes a market for you.

But at this point, I wouldn’t run out and buy another policy. If you’re getting it free of charge, let your employer handle the work. Then, if you ever sense things are going downhill at your job, you can start shopping for a long-term disability policy at that point. Right now, there’s no reason to pay out of pocket or have a second one.

Dave Ramsey is America’s most trusted voice on money and business. He’s authored four New York Times best-selling books: “Financial Peace,” “More Than Enough,” “The Total Money Makeover” and “EntreLeadership.” The “Dave Ramsey Show” is heard by more than 5 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the Web at daveramsey.com.

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